A deductible in car insurance is a predetermined amount you agree to pay before your insurance company starts compensating for losses resulting from an accident.
We covered the basics of a car insurance deductible, such as how it works and when you should pay for it, previously. In this article, we will continue the discussion on deductibles by addressing some common questions you may have about them.
Do different deductible levels affect the insurance premium?
Yes, your deductible amount certainly affects the insurance premium that you have to pay. Generally, a higher deductible usually means a lower premium, as you agreed to take up more of the expenses by yourself.
The deductible-premium ratio may also vary across insurance companies as each company may have different rules regarding how a deductible is incorporated into a car insurance policy. But on the whole, increasing the deductible from, say, RM500 to RM1,000 will reduce insurance premium costs.
What’s the downside of high deductibles?
Assuming that an unknown driver has accidentally sideswiped a car, costing the owner RM500 worth of damage. The owner has a deductible amount of RM1,000. So, the RM500 will be an out-of-pocket expense for the owner. But, if the owner’s deductible were RM200, the out-of-pocket expense would be only RM200. This means the owner can save the remaining RM300 as the insurance company will cover it.
Does driving record affect the choice of deductible?
Driving record does affect deductible decisions. A clean record merits a higher deductible for lower premiums, while a less-than-clean record warrants a lower deductible at the cost of additional premiums. At the same time, if you reside or frequently drive around an accident-prone area, it would be better to consider the lower deductible/higher premium option as it would save you the trouble of constant out-of-pocket expenses.
Do I pay a deductible if I hit a car?
You won’t have to pay a deductible if you get into an accident without damaging your car. In this case, your liability coverage will cover the other driver’s injuries and property damage, which doesn’t require a deductible. But if your vehicle is damaged and you decide to file a collision claim, you must pay your collision deductible as stated in your policy.
Do I pay the deductible if I’m not at fault?
If the other driver is deemed at fault, their insurance company can pay for your repairs if you file them, and you won’t have to pay your deductible. If you have collision coverage, you can also go through your insurer, who will seek reimbursement (including your deductible) from the other driver’s insurance company. (including your deductible) When the fault is shared, you may pay all or part of your auto insurance deductible.
Is it better to have doesn’t deductible and a higher premium?
This really depends because someone with a low deductible and a higher premium can go through a 10-year period without filing an insurance claim. In this case, the person will have paid more money over that time than someone with a higher deductible.
Assuming that both parties didn’t counter any accidents, the person with a lower deductible would have paid much more insurance premiums. Alternatively, if a person files several insurance claims within a year, driver’s better to have a lower deductible as they don’t have to bear most of the repair costs.
Understanding car insurance deductible
Deductible can be confusing to some, but having the proper understanding of it ensures you choose the right amount when purchasing an insurance policy. Learning about the possible scenarios involving deductibles is an excellent way to strengthen your knowledge and how insurance coverage works.
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